Program 1.1: Department of the Treasury (continued)
Fiscal Group aims to ensure government spending arrangements are effective. This is crucial to facilitating strong, sustainable economic growth and the improved wellbeing of Australians. Advice to portfolio ministers from the Treasury assists in formulating, implementing and explaining government spending decisions. Fiscal Group provides advice on:
- the overall fiscal strategy and budget policy, and coordination of the budget and other reports required under the Charter of Budget Honesty Act 1998 (the Charter);
- Commonwealth-State financial policy, and arrangements related to state and territory fiscal and tax issues, including through the ongoing management of the Intergovernmental Agreement on Federal Financial Relations (Intergovernmental Agreement);
- policy development in industry, regional, agriculture, environment, defence and national security policy; and
- policy development in social and income support policy, including health, the labour market, education, disability, family payments, Indigenous welfare and immigration.
Fiscal Group’s key deliverables are advice on:
- fiscal strategy that aims to ensure fiscal sustainability;
- effective government spending arrangements that contribute to improving the wellbeing of Australians;
- strategies that address intergenerational challenges, including social, fiscal and environmental sustainability; and
- Commonwealth-State financial relations.
Fiscal Group also coordinates the preparation of the Commonwealth Budget and other documents required under the Charter and administers National Specific Purpose Payments (National SPPs), National Health Reform payments, National Partnership payments, goods and services tax (GST) payments and other general revenue assistance to the States. Details of these payments can be found in programs 1.4 to 1.10.
In 2012-13, Fiscal Group’s key outcomes were:
- advising on industry and regional policy responses to continued structural change, environment and agricultural policy, and on defence and national security matters;
- advising on the implementation of the Clean Energy Future Package and the establishment of the Clean Energy Finance Corporation;
- working with other agencies on the development and implementation of the National Plan for School Improvement;
- advising on the fiscal outlook and delivering the Government’s commitments on fiscal policy;
- advising on budget priorities consistent with the medium term fiscal strategy;
- preparing, with the Department of Finance and Deregulation, the Final Budget Outcome 2011-12 (September 2012), the Mid-Year Economic and Fiscal Outlook (MYEFO) 2012-13 (October 2012) and the 2013-14 Budget (May 2012);
- advising, in consultation with the Australian Office of Financial Management (AOFM), on debt issuance and debt policy issues;
- advising on operational issues related to the Future Fund and the three Nation-Building Funds;
- advising on issues related to the Parliamentary Budget Office (PBO), including amending the Parliamentary Service Act 1999 to require the PBO to publish a post-election report on the cost of election commitments;
- advising on the framework for federal financial relations, which commenced on 1 January 2009, including the development of new National Partnerships and other agreements;
- payments to the States totalling over $92.3 billion including National Health Reform funding, National SPPs (in schools, skills and workforce development, disability services and affordable housing), GST payments and other general revenue assistance and National Partnership payments;
- providing secretariat support to the GST Distribution Review;
- advising on and monitoring, the First Home Owners Boost;
- advising on the development and implementation of DisabilityCare Australia, the National Disability Insurance Scheme and the National Injury Insurance Scheme;
- providing secretariat support for the Advisory Panel on Positive Ageing;
- advising on social and economic policies in education, employment, immigration, families, health, ageing, disability and Indigenous issues; and
- continuing to participate in the Centre for Market Design in collaboration with the Victorian Department of Treasury and Finance, and the University of Melbourne.
Analysis of performance
Advice on the fiscal and budget strategies
During 2012-13, the Treasury provided advice to the Deputy Prime Minister and Treasurer and other portfolio ministers on the Australian Government’s budget position over the forward estimates and the medium term, to inform overall policy settings and to provide context for the Government’s decision-making. The fiscal outlook was updated in the 2012-13 MYEFO, and the 2013-14 Budget.
As fiscal estimates are a joint responsibility, the Treasury worked extensively with the Department of Finance and Deregulation, the Australian Taxation Office (ATO) and other government departments and agencies. Assessments of the budget position incorporated changes to the economic outlook, so advice was based on the most reliable and up-to-date information available at the time the economic statements and budget were prepared.
The 2012-13 MYEFO was released by the Deputy Prime Minister and Treasurer and Minister for Finance and Deregulation on 22 October 2012, and updated the fiscal estimates published in the 2012-13 Budget.
The 2013-14 Budget, published in May 2013, reported that the budget was returning to balance in 2015-16 and surplus by 2016-17.
The Treasury assisted the Government in implementing its fiscal strategy by managing budget processes and advising on the overall budget strategy and priorities. In particular, the Treasury provided advice to the Government on the medium-term fiscal strategy in the context of returning the budget to surplus once economic growth is around trend. In this respect, good budget processes help governments make decisions based on accurate information, and allow proposals to be prioritised according to overall budget objectives.
Contribution to public debate and awareness
The Government’s Budget publications are available free at www.budget.gov.au. Since the 2013-14 Budget, there have been over 210,270 unique visitors to the Budget website and over 2.6 million pages have been viewed. Widespread access to these documents helps keep the public informed of budget decisions and the fiscal outlook.
The Treasury and the Department of Finance and Deregulation jointly prepare the Government’s budget documentation. The Treasury also prepares accessible summaries for non-specialist readers. This year, these were the Budget Overview, Budget at a Glance, the National Plan for School Improvement, DisabilityCare Australia, Nation Building Infrastructure and the Tax Reform Road Map.
Generally, the Treasury is primarily responsible for preparing budget documentation on:
- the principal budget aggregates and the Government’s fiscal strategy and objectives;
- economic assumptions underpinning the budget estimates;
- tax revenue estimates;
- tax expenditure estimates; and
- the conduct of Commonwealth-State financial relations.
Reporting requirements are set out in the Charter of Budget Honesty and are consistent with leading international practice. To help achieve better fiscal outcomes, the Charter promotes:
- disciplined budget management, with fiscal policy based on principles of sound fiscal management;
- transparency, with regular reports stating fiscal objectives and expected outcomes;
- accountability, with information allowing an informed assessment of the conduct of fiscal policy; and
- reporting against external accounting standards.
Under the Charter, budget reporting follows an annual cycle comprising the budget in May, a mid-year update before 31 January and a final budget outcome the following September.
The Final Budget Outcome 2011-12 was published in September 2012. In 2011-12, the Australian Government general government sector recorded an underlying cash deficit of $43.7 billion. This outcome was around $661 million lower than estimated at the 2012-13 Budget, reflecting higher than expected cash receipts and lower than expected cash payments.
Information on the Government’s financial relations with State and Local Governments is detailed in the 2013-14 Budget, Budget Paper No. 3, Australia’s Federal Relations. This paper, produced by the Treasury, is the main public source of information on Australian Government payments to the States. It also informs the States of their expected payments in the upcoming financial year.
In addition, this Budget Paper also includes information on fiscal developments in the States, as well as advice on policies relating to Commonwealth-State financial relations. Relevant information is also included in MYEFO and the Final Budget Outcome documents.
Information on the federal financial framework is available on the Standing Council on Federal Financial Relations (Standing Council) website at www.federalfinancialrelations.gov.au.
Debt management policy
In consultation with the AOFM, Treasury provided advice on debt issuance and debt policy issues. This included advice on issues affecting the Government’s debt management operations including the performance, governance and functioning of the Commonwealth debt market.
Specific details of the Government’s debt issuance program are on the AOFM website at www.aofm.gov.au.
Future Fund and Nation-Building Funds
During 2012-13, the Treasury continued to provide policy advice to portfolio ministers on operational issues relating to the Future Fund and the three Nation-building Funds. Further information regarding the performance of the Future Fund is at www.futurefund.gov.au.
Australia’s Federal Financial Relations
The Commonwealth is working in partnership with the States in a number of reform areas benefitting all Australians. Significant progress has been made in implementing the reform agenda through the Intergovernmental Agreement. The framework has proved to be flexible and able to facilitate reform activity, including health reform, schools and the National Disability Insurance Scheme.
Under the Intergovernmental Agreement, the Commonwealth makes payments to the States equivalent to the revenue received from the GST. GST revenue is paid on a monthly basis and distributed in accordance with relativities determined by the Treasurer. This follows recommendations by the Commonwealth Grants Commission and discussion at the Standing Council for Federal Financial Relations.
The ATO and Australian Customs and Border Protection Service collect GST revenue on behalf of the States, and the States compensate them for the costs incurred in administering and collecting GST revenue. The Treasury managed the payments made to the States and ensured they were administered accurately.
General revenue assistance is provided to the States, including GST payments, without conditions, to spend according to their own budget priorities.
Details on general revenue assistance are provided under Program 1.4.
Payments for specific purposes (National SPPs and National Partnerships)
The Commonwealth provides financial support to the States to be spent in five service delivery sectors – comprising four National SPPs (schools, skills and workforce development, disability services and affordable housing) and National Health Reform funding (which replaced the National Healthcare SPP from 1 July 2012). These are associated with six national agreements, which contain mutually-agreed objectives, outcomes and performance indicators, and which clarify the roles and responsibilities that guide the Commonwealth and the States in the delivery of services in these sectors.
In accordance with the transitional arrangements outlined in the National Health Reform Agreement, for 2012-13 and 2013-14 the Commonwealth provides funding equivalent to the amount that would otherwise have been payable under the National Healthcare SPP. From 2014-15, National Health Reform funding will also include an additional element comprising efficient growth funding. National Health Reform funding is paid into a National Health Funding Pool to support public hospital services.
In addition, National Partnerships support the delivery of specific projects, facilitate reforms and/or reward those jurisdictions that deliver on nationally significant reforms.
Details on National SPPs and National Partnerships are provided under Programs 1.5 to 1.10.
Standing Council for Federal Financial Relations
The Standing Council, comprising the Commonwealth Treasurer and all State and Territory Treasurers, considers ongoing reform of federal financial relations and oversees the Intergovernmental Agreement. The Treasury advised the Treasurer in relation to these matters and provided secretariat support to the Standing Council. The website for the Standing Council is www.federalfinancialrelations.gov.au.
The Standing Council met twice in 2012-13. Treasurers focused on monitoring the national and state and territory economies; progressing GST Distribution Review recommendations; discussing infrastructure funding; and monitoring progress under the COAG reform agenda.
GST Distribution Review
On 30 March 2011, the Government appointed the Hon John Brumby, Mr Bruce Carter and the Hon Nick Greiner AC to review Australia’s system of distributing the GST amongst the States and Territories.
The final report of the GST Distribution Review (the Review) was released publicly on 30 November 2012.
The recommendations of the Review were discussed at the Standing Council meeting in April 2013. The Standing Council agreed to initiate an expedited Commonwealth Grants Commission (CGC) methodology review, taking into account certain recommendations from the Review. The CGC has been issued with terms of reference for the methodology review and a final report is due by 28 February 2015.
Further information on the Review is available online at www.gstdistributionreview.gov.au.
Australian Loan Council
The Australian Loan Council is a Commonwealth-State ministerial council that meets annually to consider jurisdictions’ nominated borrowings for the forthcoming year with regard to each jurisdiction’s fiscal position and the macroeconomic implications of the aggregate figure.
Heads of Treasuries
At Heads of Treasuries meetings, the treasuries of the Australian and State Governments share information on common issues. The Secretary to the Treasury and his state and territory counterparts met on three occasions in 2012-13 to discuss the general operation of the Federal Financial Relations framework, current economic conditions and the fiscal outlook, and tax and financial issues.
GST Administration Sub-committee
The Treasury chairs this sub-committee, which comprises officials from the Treasury, the ATO and State Treasuries. The sub-committee met once in 2012-13. The subcommittee provided advice on GST policy and administrative issues, including discussing GST revenue and payments.
Industry, Regional, Climate Change and Environment, and Defence and National Security
Industry and regiona
The Treasury advised on industry assistance, science and innovation, arts, sports and regional development issues. This included advice on trade remedies, the manufacturing industry, structural and regional adjustment and venture capital.
The Treasury provided advice on implementing carbon pricing and the Clean Energy Future package, as well as on low emissions technologies and energy efficiency, renewable energy and alternative fuels, international engagement on climate change issues, and the establishment of the Clean Energy Finance Corporation (CEFC).
The Treasury advised the Deputy Prime Minister and Treasurer on the Tasmanian Forests Intergovernmental Agreement, the development of the National Food Plan, Australia’s Antarctic Territory and live animal exports.
The Treasury participated in inter-departmental committees regarding biodiversity, marine reserves, biosecurity, drought policy, water policy and the Murray-Darling Basin Plan.
Defence and national security policy
The Treasury advised on a range of defence and national security issues, including unauthorised maritime arrivals; the Coordinated National Security Budget process and the 2013 Defence White Paper. The Treasury also provided advice to support the Secretary in his role on a number of subject-specific committees including the Defence Strategic Reform Advisory Board.
The Treasury has continued to participate in the Secretaries’ Committee on National Security, which examines and advises on proposals considered by the National Security Committee of Cabinet. It also participated in inter departmental processes concerning Defence Capability Plan projects, cyber policy, border protection policy and various aspects of domestic security arrangements.
Social, Disability, Education, Indigenous, Labour Market, Immigration and Health policy
During 2012-13, the Treasury:
- worked with the NDIS Taskforce, the States and Territories and other agencies to develop and implement DisabilityCare Australia, the National Disability Insurance Scheme, and the National Injury Insurance Scheme, and provided secretariat support to the National Injury Insurance Scheme Advisory Group;
- worked with other agencies on the development and implementation of the National Plan for School Improvement;
- worked with other agencies to progress the Social Inclusion agenda;
- provided secretariat support for the Advisory Panel on Positive Ageing;
- provided policy advice on child care and early childhood issues, including input to the development of the National Partnership Agreement on Universal Access to Early Childhood Education;
- worked with Revenue Group and the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to review the adequacy of the Household Assistance Package; and
- provided policy advice on the Commonwealth response to natural disasters and on natural disaster recovery policy more broadly.
Treasury worked closely with the NDIS Taskforce, the States and Territories and other agencies to develop and implement DisabilityCare Australia, the National Disability Insurance Scheme.
Treasury was also tasked with progressing the National Injury Insurance Scheme (NIIS), along with the States and Territories. The NIIS is a federated model of separate, state-based no fault schemes to provide lifetime care and support to people who incur a catastrophic injury as a result of an accident. In 2012-13, the minimum standards for a NIIS for motor vehicle accidents across the States and Territories were developed and agreed. Work on the other accident streams (workplace accidents, medical treatment injury and general accidents) also commenced.
Treasury provided secretariat support to the NIIS Advisory Group established by the Minister for Financial Services and Superannuation. The Advisory Group considered the four accident streams and undertook work on medical treatment injury and general accident injury.
The Treasury continued to provide advice on education and skills policy during 2012-13, working collaboratively across Government on the National Plan for School Improvement and a range of other education and training-related budget initiatives. The Treasury also assisted the work of the National Panel for Economic Reform. This Panel, consisting of representatives from government, business, community groups and employee organisations, worked together to identify ways to boost the human capital of the Australian workforce.
The Treasury had a continued role in advising on the Government’s commitment to closing the gap in Indigenous disadvantage.
Labour market programs, participation and workplace relations
The Treasury advised on a range of employment and participation issues, with a particular focus on working age income support payments. The Treasury also worked closely with the Department of Education, Employment and Workplace Relations to develop a whole-of-government approach to the 2013 Minimum Wage Review and prepare Government submissions to the Minimum Wage Panel’s minimum wage decision.
The Treasury continued to provide advice that links Australia’s immigration policy to labour market needs and prevailing economic conditions. In particular, advice was provided on reforms to the Migration Act 1958 and policy arrangements applying to temporary visas for skilled workers.
A National Health Reform Agreement was finalised with all States and Territories in August 2011. The Treasury continued to assist the Department of Health and Ageing with implementation of this agreement, in the lead up to the July 2014 commencement of new arrangements directly linking Commonwealth National Health Reform funding to the level of services delivered by public hospitals. This included implementing changes to the financial framework and modelling of the fiscal implications of the agreement.
Advisory Panel on Positive Ageing
On 18 April 2012, the Government announced the establishment of an ongoing Advisory Panel on Positive Ageing as part of the Government’s response to the Final Report of the Advisory Panel on the Economic Potential of Senior Australians ‘Turning Grey into Gold’. In the 2012-13 Budget, the Government announced funding of $4.7 million over four years to establish this Panel. The Panel consists of five members: Mr Everald Compton AM (Chairman); Professor Brian Howe AO; Professor Gill Lewin; Commissioner Susan Ryan AO; and Mr Neville Roach AO. The Secretariat for the Panel is located within Treasury.
The role of the Advisory Panel on Positive Ageing is to lead a national dialogue on ageing issues, improve coordination of policy design across portfolios, and work with the Government on implementation and design of ageing policy. The Panel has held targeted consultations throughout 2012-13 with a range of stakeholders to discuss issues such as lifelong learning, Indigenous aged care, mature-age employment and technology. In December 2012, the Panel held a roundtable to discuss affordable and age-friendly housing.
Further information on the Advisory Panel is available online at http://www.treasury.gov.au/Policy-Topics/PeopleAndSociety/positive-ageing.
The Treasury continued to provide policy advice on child care and early childhood issues. This included input to the development of the National Partnership Agreement on Universal Access to Early Childhood Education through COAG’s Senior Officials Working Group, comprising representatives of first ministers Departments, treasuries and early childhood education Departments
Centre for Market Design
In 2011-12, the Treasury, in collaboration with the Victorian Department of Treasury and Finance and the University of Melbourne, established a Centre for Market Design (the Centre). The Centre provides a mechanism for participants to build capacity and capability in the area of market design and experimental economics and apply economic design techniques to public policy, procurement and resource allocation problems. The concept is being tested as an initial two-year pilot.
During the Centre’s first year of operation Treasury, in conjunction with the Department of Resources, Energy and Tourism (DRET), participated in the offshore petroleum auction project which focused on optimising the allocation of permits under the existing legislative framework.
Further information on the Centre is available at www.cmd.org.au.